Crude Oil Ends Sharply Higher, Pushing $108

(RTTNews) - U.S. crude oil surged to end sharply higher on Thursday, after some upbeat macroeconomic data out of the U.S. fueled hopes of continued demand growth for oil, notwithstanding a strong dollar. Investors exuded optimism after some better-than-expected initial jobless claims and manufacturing activity expansion in the U.S., Europe and China.

In some encouraging economic news from the U.S., the Labor Department said initial jobless claims unexpectedly dropped to a five-year low in the week ended July 27 -- the lowest level since the week ended January 19, 2008. The data has generated optimism ahead of Friday's monthly jobs report, which could have a significant impact on the economic outlook.

The index of U.S. manufacturing activity reached a two-year high with a better-than-expected increase, a report from the Institute for Supply Management showed Thursday, with investors largely ignoring an unexpected drop in construction spending in June.

Meanwhile, operating conditions across China's manufacturing sector improved unexpectedly in July, a joint survey by China Federation of Logistics and Purchasing (CFLP) and the National Bureau of Statistics showed Thursday.

Light Sweet Crude Oil futures for September delivery, the most actively traded contract, jumped $2.86 or 2.7 percent to close at $107.89 a barrel on the New York Mercantile Exchange Thursday.

Crude prices for September delivery scaled a high of $108.06 a barrel intraday and a low of $105.10.

The EIA on Wednesday said U.S. crude oil inventories edged up 0.40 million barrels and gasoline stocks were up 0.80 million barrels in the week ended July 26. Analysts expected crude oil stocks to shed 2.45 million barrels and gasoline stocks to move down 1.5 million barrels last week.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 82.29 on Thursday, up from 81.67 late Wednesday in North American trade. The dollar scaled a high of 82.37 intraday and a low of 81.61.

The euro traded lower against the dollar at $1.3217 on Thursday, as compared to $1.3302 late Wednesday in North America. The euro scaled a high of $1.3311 intraday and a low of $1.3196.

In economic news from the U.S, the Labor Department said initial jobless claims fell to 326,000, a decrease of 19,000 from the previous week's revised figure of 345,000. The decrease surprised economists, who had expected jobless claims to edge up to 345,000 from the 343,000 originally reported for the previous week.

Separately, the Institute for Supply Management said its purchasing managers index surged up 55.4 in July from 50.9 in June, with a reading above 50 indicating growth in U.S. manufacturing activity. Economists had expected the index to climb to a reading of 53.1.

The U.S. Commerce Department report on Thursday showed an unexpected drop in total construction spending for June. Construction spending fell 0.6 percent to a seasonally adjusted annual rate of $883.9 billion in June. Economists expected spending to increase by about 0.4 percent.

European Central Bank President Mario Draghi on Thursday said recent survey data showed improvement in the euro area economy, suggesting interest rates to likely remain low in the near term.

European Central Bank President Mario Draghi in his routine post-decision press conference in Frankfurt said, "Recent confidence indicators based on survey data have shown some further improvement from low levels and tentatively confirm the expectation of a stabilization in economic activity."

The central bank left the main refinancing rate steady at a record low 0.50 percent today. The rate was slashed by quarter-basis point in May, the first rate cut in nine months. The bank also held the marginal lending facility rate at 1 percent, following a 50 basis points cut in May. The zero deposit rate was also left unchanged

Elsewhere, the eurozone manufacturing sector expanded for the first time since July 2011, survey data from Markit Economics showed. The Purchasing Managers' Index rose to 50.3 in July from 48.8 in June and above the flash estimate of 50.1.

An indicator of the performance of the German manufacturing sector increased in July to the highest level in on-and half years, indicating an improvement in operating conditions across the sector, survey data released by Markit Economics and BME showed. The seasonally adjusted manufacturing purchasing managers' index rose to 50.7 in July from 48.6 in June. The flash estimates were for a reading of 50.3. Readings above 50 indicates expansion of the sector, while those below suggest contraction.

The Bank of England retained the asset purchase facility at GBP 375 billion and interest rate at a record low 0.50 percent, as widely expected. Meanwhile, the European Central Bank retained its refi rate at a record low 0.50 percent.